The post office offers various types of deposit schemes, which are quite popular among investors. It is mostly because they are guaranteed – backed up by the government. Some of these schemes, also come with tax benefits under section 80C of the Income-tax Act, hence, many investors prefer having these schemes in their portfolio.
The multiple savings schemes include Post Office Time Deposit Account (TD), Post Office Monthly Income Scheme Account (MIS), Senior Citizen Savings Scheme (SCSS), Post Office Savings Account, National Savings Certificates (NSC), Kisan Vikas Patra (KVP), Sukanya Samriddhi Accounts, 5-Year Post Office Recurring Deposit Account (RD), and Public Provident Fund Account (PPF). However, these schemes cater to different types of investors with different goals.
Therefore, investors planning to save for the long term could consider investing in Kisan Vikas Patra (KVP). Not only the principal amount invested is safe as it is backed by a government guarantee, but the interest earned by the investor is also fully safe. With the KVP certificates, an individual can make a minimum investment of Rs 1000, with no upper limit. The current interest rate offered is 6.9 per cent p.a. compounded annually.
Experts say the scheme’s primary objective is to encourage long-term financial discipline in people. Currently, the tenure for the scheme is 10 years and 4 months (124 months) as per the latest update. The popularity of this scheme is because it is known to double a one-time investment in around 10 years. For instance, after investing Rs 5,000 in the KVP certificate scheme you will get a corpus of Rs 10,000 postmaturity. Hence, after investing a lump sum amount today, you can get double the amount at the end of the 124th month.
There are various types of Kisan Vikas Patra certificates available;
– Single Holder Type Certificate, which is issued to an adult for self. It is also issued on behalf of a minor or to a minor.
– Joint ‘A’ Type Certificates are issued jointly to two adults, payable to both the holders jointly or to the survivor.
– Joint ‘B’ Type Certificates are issued jointly to two adults, payable to either of the holders or the survivor.
Industry experts say, KVP is an ideal choice for risk-averse individuals with surplus money, which is not required shortly. However, note that it all depends on your risk profile and goals. Such as investors looking for tax-saving schemes can instead opt for options like PPF (Public Provident Fund), NSC (National Saving Certificates), tax-saving bank FD Schemes, or Equity Linked Savings Scheme (ELSS) if one is open for some level of risk exposure.
Another benefit of Kisan Vikas Patra is its guaranteed returns. Hence, regardless of the market fluctuations, one will get the sum guaranteed. Even though the current maturity period for this certificate is 124 months, the maturity proceeds will continue to accrue interest till the investor withdraws the amount.
Additionally, even though the account matures after 10 years and 4 months, the lock-in period is 30 months. Therefore, one can make premature closure of KVP before maturity, but only after 2 years and 6 months. To withdraw the maturity amount, the account holder needs to submit an application Form-2 to the accounts office.
With an invested amount of Rs 1000, if one withdraws right at the end of the lock-in period, two and half years but less than three years, he/she will get Rs 1154. Whereas after five years but less than five and half years, one will get Rs 1332. After seven and half years but less than eight years, one will get Rs 1537. After 10 years but before the maturity of the certificate, Rs 1774 will be payable to the investor and on maturity, the investor will get Rs 2000.